‘3-year bond will be highly oversubscribed’ - Analysts

The 3-year Government of Ghana bond expected to be issued today June 28, 2018, will be oversubscribed, many analysts have predicted.

Ghana has been to the international market to raise funds through Eurobond among others this year, all of which have been subscribed, signalling investor confidence in the Ghanaian economy. The country received about US $8 billion from investors from the Eurobond issuance in May 2018, a situation the Finance Minister Ken Ofori-Atta described as historic.

Many investment analysts have expressed optimism regarding the interests in the debt instruments following improved economic fundamentals such as inflation and interest rate.

Suleimana Mohammed of doobia.com said “We envisage that the government could raise more than GH¢250 million if there is strong demand for the 3-year bond in a bid to cushion the adverse impact of weak demand in the short-end of the yield curve.

Barclays, Databank, Fidelity, IC Securities and Stanbic are book runners.
The repayment of the 3-year bond which will mature in 2021 will be done semiannually. The minimum bid will be GH¢50,000 and multiples of GH¢1,000 thereafter.

Government is optimistic of registering a favorable coupon rate on the bond. This follows the record 7.627 percent yield recorded on the US$1 billion bond amid turbulence from emerging markets.

Finance Minister, Ken Ofori-Atta said “We want to really move much faster to improve our ratings to double B’s and triple B’s to get better rates.

The funds to be raised from the bond will largely be used to settle maturing debts while the rest will be used to finance infrastructure projects such as roads.

They will be subsequently be listed on the Ghana Stock Exchange for trading on the secondary market.

Debt strategy

The government’s debt strategy since 2017 has been re-profiling its debt in order to reduce cost of interest and also obtaining a higher tenor for the instruments. This has also led to it borrowing more on the international market than the local market.

Borrowing less on the local market has led to lower yield on Treasury bills or short-term securities and subsequently more money for the private sector in the form of credit.

Government borrowing from the domestic market slowed down significantly in 2018.